COVID-19 is having an unprecedented impact on the New Zealand Government's fiscal position, with a sizeable residual cash deficit forecast in BEFU 2020.
To fund the substantial residual cash deficits, NZDM have increased the annual borrowing programme in each year of the forecast period. Both NZGB and T-Bill issuance forecasts have increased. The increase in the forecast borrowing programme is front-loaded and higher than the residual cash deficit indicates. This enables a larger cash buffer to be built up, compared to that typically held by NZDM, to account for heightened uncertainty. In the 2020/21 year, NZGBs issuance is forecast to be NZ$60 billion. As is standard practice, this will be primarily undertaken through tender issuance, though the frequency of syndicated issuance has increased. Two syndications have been announced, and are planned for the September 2020 quarter.
The focus will remain on nominal bonds as the primary funding vehicle, although IIBs remain an important part of the funding portfolio. Some flexibility is maintained in T-Bill issuance in order to respond to short-term liquidity requirements in an efficient manner. The core principles of transparency, consistency and even-handedness remain important foundations for the Funding Strategy.